1. They’re not impulsive.

How many times have you made an impulsive decision while at the grocery store? Shopping on line? Even when buying a car? It’s common for most people to make a few impulsive decisions when making purchases. Millionaires, however, have the ability to delay gratification and hold back on making impulsive decisions.

  1. Know the difference between wants and needs.

Millionaires also know the difference between wants and needs. We all have moments when we would like a new house, pair of shoes, car, or a fancy dinner. But, are they necessary? Or, do you just want that new luxury car? Sure that car is powerful and you’d look great behind the wheel, but do you need it? Instead of spending money on things that aren’t practical, millionaires put that money towards essential items that will continue to increase their wealth. FYI, vehicles are typically one of the most expensive items people buy. With financing, insurance, maintenance costs and gas costs included, it can sometimes cost as much as a mortgage payment! Also resist upsizing; do you really need a 4500 square foot house?

  1. Focus on the long term.

Long-term goals take a minimum of one to five years to accomplish. Long-term goals are excellent motivators. They enable you to look beyond the moment and put into perspective why you are spending your time today as you are. Revisit your financial plan regularly to make sure you’re on track and adjust the plan as you go along. If there is no plan to achieve the goal, you are likely not to achieve it!

  1. Have multiple sources of income.

After establishing some financial security, millionaires begin to look for other ways to bring in money. Why? Because they realize that their main source of income could suddenly dry-up. To avoid a possible loss of revenue, a millionaire will establish multiple sources of income that generate cash flow as a backup plan. Examples are real estate, investments and business income.

  1. Automate investments.

Have your investments come out automatically from your bank account so you don’t even have to think about it. Deduct a portion of your paycheck and place it into a TFSA, RRSP, Stock plan etc. Millionaires invest so frequently that it’s becomes a habit. They know how and when to take advantage of an opportunity, as well as how much to invest, seemingly without blinking an eye. But they have practiced this investment strategy often enough that they gain a definite knowledge about investment workings.

  1. Follow a budget.

By following a budget, millionaires can see how much money is coming in and how much is going out. This allows them to create a spending plan so that they can afford the necessities and remove wasteful expenses. Wealthy people keep track of where their money is being spent. There is fantastic, easy to use budgeting software out there today (some free software as well)

  1. Are prepared for emergencies.

Millionaires have a rainy-day fund set aside. They realize that there may be time when they’ll have a crisis, like job loss, an unexpected family death or an illness. Instead of borrowing money, they have the money saved up to support themselves until the crisis is over. Many disasters can be averted by being prepared with an emergency fund or proper insurance policies in place such as life insurance, disability or critical illness insurance.

  1. Only invest what in what they understand.

Warren Buffett the legendary stock investor offers the advice that you should “invest in what you know.” It’s a trick that millionaires have embraced because when they understand how a company generates income and profitability, they have a competitive edge. They’re aware of risks and opportunities.

  1. Keep track of expenses.

Do you know how much money you’re spending on your expenses? If you don’t, start tracking your daily, monthly, and yearly expenses – just like millionaires do. People hate the word budget but that’s truly important. You’ll quickly realize that you’re wasting money on items that aren’t needed or can be purchased at a better rate.

  1. Live below their means.

It’s no secret that wealthy individuals live either below or within their means. The concept is fairly simple, spend less than what you earn. Many millionaires could have lavish mansions or private jets but they opt to save money for necessities and not luxury items. A couple of very frugal billionaires as an example are Warren Buffet and Mark Zuckerberg

  1. Willing to make sacrifices.

So what if you’re driving around in a 2000 Toyota Camry. You realize that eventually, like within the next two years, you’ll be able to purchase a new vehicle because you’ll have the means to do so. That’s how millionaires think when it comes to managing their money. They’ll make temporary sacrifices when it benefits the bigger goal. I personally buy gently used cars so I’m not paying the highly outrageous price tag on new vehicles. Make sacrifices today to live better tomorrow.

  1. They don’t get into debt.

Millionaires don’t allow themselves to get in debt. They don’t borrow any money and avoid using credit cards if they don’t have the money to pay the card off – unless it’s an investment to improve their business or start a new company. In other words, if they don’t have it, they’re not going to spend it. They do without – rather than spend what they don’t have.

  1. They get financial advice.

Millionaires know their strengths and weaknesses. Instead of spending the time and money to fix their weaknesses – they ask for help – especially when it comes to money management. Just because they built a social network or gadget, doesn’t mean that they know how to invest or save their money. They ask a financial advisor or an accountant for help.

  1. Educate Themselves

Formal education is not a prerequisite for millionaires. Bill Gates and Mark Zuckerberg both earned their fortunes without obtaining a college degree. Educating yourself by reading books and going to seminars is key. Learning how investing works and understanding how financial products differ will go a long way toward helping you reach your financial goals.

 

 

  1. Run the numbers before making a decision.

I’m not talking about doing mathematical equations that you did back in your trigonometry class, just basic addition, subtraction, multiplication and division before making any financial decisions.  For example, if you have an older vehicle that needs some repairs, a millionaire would compare the costs of repairing the car to purchasing a new vehicle. Then, the decision will be based on whatever’s more cost-effective.

Joanne Carmichael is the owner of Carmichael Insurance in the Ottawa Region.  To learn more please contact Joanne Carmichael at: joanne_carmichael@cooperators.ca  or 613-723-0747.

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